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Current State of Indian Economy September 2010
Current State of Indian Economy September 2010
September 2010
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Federation of Indian Chambers of Commerce and Industry
New Delhi
The overall mood of the industry looks promising with growth at 10.6 per cent for the five month
period , April- to August 2010. However, growth slipped to 5.6 per cent for the month of August
2010 from 10 percent plus in the previous year.
Capital goods production remained volatile as growth dipped into the negative zone on two
occasions during the present fiscal after a steep rise. However, the average growth stood at 29 per
cent during the period April- August as against 3.4 percent increase in the corresponding period of
previous year. Output in the basic and intermediate goods rose but not as much as seen in the
previous year. Consumer goods segment went up by 8.6 percent during the period from April to
August in 2010-11, as against 3.6 percent increase in output in the previous year and the rise was
seen on account of consumer durables segment.
8 of the 17 industry segments were seen to surpass the growth rate during the first five months of
FY11 as compared to the growth observed in the previous year.
The six core infrastructure industries continues to remain positive cumulatively up to August 2010,
however the pace of growth is slightly lower as compared to the growth posted in the previous year.
Growth in the overall infrastructure industries mainly came from crude petroleum, petroleum
refinery and steel.
Government’s efforts in taming inflation brought positive results. In September 2010 the rate of
inflation was brought under 10 per cent. Currently the rate of inflation averaged for the month of
September 2010 was 8.62 percent, this has come down from 9.55 percent in August and 10.3 in July
2010.
During the month of September the confidence of the foreign investors in the Indian stock market
was seen to go up. The index Sensex was observed to swing between 19-20 K and Nifty was seen
move between 5- 6 K points.
Investments in the government securities slowed compared to the previous year and so were the
aggregate deposits. The total credit off-take increased which was on account non-food segment.
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Fiscal deficit up to August this year was lower at Rs 151425 crores compared to the fiscal deficit
recorded in the previous year which was at Rs 182290 crores . The reasons for low fiscal deficits
were increase in the revenue receipts ( non tax source ) on account of disinvestments in the PSUs
and auction of 3G and BWA spectrum.
Total merchandise trade from April – August FY11 stood at USD 227 billion compared to the total
trade of USD 171.9 billion in the corresponding period of previous year.
The trade deficit widened by 56 billion ( upto August) as the merchandise exports cumulatively from
April to August 2010-11 rose to USD 85 billion as compared to USD 66 billion in the 2009-10. Imports
were also seen to increase by 33 per cent to USD 141 billion.
FDI is an area which requires special attention because of its inherent long term investment
intentions. Presently the FDI investments received up to August this year is running behind the
investments received in the previous year.
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Contents
Title Page
1 Industrial Growth 6
3 Trends in Inflation 9
4 Monetary Indicators 10
6 Fiscal Management 12
7 Foreign Trade 14
8 Capital Inflows 15
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List of Tables and Graphs
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1. Industrial growth
The growth in IIP for the period April to August 2010-11 stood at 10.6 percent and this was higher
than the growth posted during the five month period of the previous fiscal. The overall mood of the
industry looked promising, however growth in August decelerated to 5.6 per cent as compared to 10
percent plus in the previous year, which was slightly disappointing. The high growth oriented
manufacturing sectors which accounts for the majority share has been the backbone of the rising
Industrial growth numbers.
Coming to the use-based classification one can say that the capital goods which includes the plant
and machinery grew by a phenomenal number, with average growth for April- August being 29 per
cent as against 3.4 percent increase in the previous year. Nevertheless, capital goods shows
volatility when we look at the monthly numbers as it turns negative for the second time this year in
August 2010 after a positive movement. Output in the basic and intermediate goods rose but not as
much as seen in the previous year.
The consumer goods cumulatively for the five-month period has also shown acceleration in growth,
it rose by 8.6 percent as against the increase of 3.6 percent seen in the previous year. The rise was
however, seen to mainly come from the consumer durables goods category.
Acceleration in growth was observed in food products, cotton textiles, jute products , paper
products, rubber products, basic metals , metal products machinery and transport equipments
during the period from April to August as compared to the corresponding growth numbers of the
previous year.
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Table- 1.2: Growth in 17 Industry sectors
17 industry sectors
Food Products 9.1 -6.0 16.8
Beverages, Tobacco and Related Products 2.4 5.7 2.5
Cotton Textiles 5.5 5.7 4.0
Wool, Silk and man-made fiber textiles 2.3 20.4 4.6
Jute and other vegetable fiber Textiles (except 0.6
cotton) -10.2 7.0
Textile Products (including Wearing Apparel) 2.5 21.6 -3.0
Wood and Wood Products; Furniture and Fixtures 2.7 2.7 -15.3
Paper & Paper Products and Printing, Publishing & 2.6
Allied Industries -0.2 11.5
Leather and Leather & Fur Products 1.1 -0.4 19.6
Basic Chemicals & Chemical Products (except products of 14.0
Petroleum & Coal) 14.8 -2.0
Rubber, Plastic, Petroleum and Coal Products 5.7 20.4 12.2
Non-Metallic Mineral Products 4.4 7.3 3.5
Basic Metal and Alloy Industries 7.5 2.1 6.4
Metal Products and Parts, except Machinery 2.8
and Equipment 9.5 33.4
Machinery and Equipment other than Transport 9.6
Equipment 15.2 0.4
Transport Equipment and Parts 4.0 15.0 22.8
Other Manufacturing Industries 2.5 9.5 27.9
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2 Core infrastructure industries
The growth numbers in the six core infrastructure industries also suggest steady growth.
Cumulative growth numbers up to August this fiscal shows growth slightly lower at 4.3 per cent as
compared to the growth posted up to August in the previous fiscal ( 4.5 percent ) . The growth is
mainly ascribed to good performance seen in the crude petroleum, petroleum refinery and steel.
And all the other sectors grew positively, however at a pace lower as compared to the pace of
growth in the previous year.
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March 3.3 -0.4 5.2 7.8 6.3 7.8
3. Trends in inflation
Inflation in September 2010 has been brought under 10 per cent. The inflation was 8.62 percent in
September 2010 on a Y-o-Y basis , this has been brought down from 9.55 percent in August this
year. The buildup in the wholesale price index in September over March has been 3.9 percent
compared to the build of 5.4 percent in the previous year.
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November 10.4 13.5 10.8 13.9 11.1 15.7 11.1 15.7
December 9.7 15.0 9.8 15.5 11.1 17.2 11.1 17.0
January 10.4 16.2 10.4 16.9 11.4 17.6 11.1 17.4
February 9.6 14.9 9.9 15.8 10.8 16.5 10.8 16.5
March 8.0 14.9 9.3 14.9 9.5 15.8 9.7 15.5
Source: Ministry of Labor, CMIE
4. Monetary indicators
The broad money supply ( M3) in August this year has slowed to 15 percent calculated on a
Y-o-Y basis as compared to 19 percent in the previous year. Growth in the net bank credit
to the government halved compared to the growth in the previous year and credit to the
commercial sector has increased by 18.3 per cent presently as compared to 13.8 percent in
the previous year. Interbank liquidity is observed to be on the lower side low and the mood
is likely to continue on account of the festive season.
Table-1.7: Monetary sector indicators – up to August (August 2010-11 over March 2009-10)
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5. Stock market trends
Sensex was observed to swing between 19-20 K level and Nifty traded above 6 K points
during the month of September of this year. Investment activity was mainly observed
strong among the FII community in the Indian markets.
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6. Fiscal Management
Fiscal deficit up to August this year was lower at Rs 151425 crores compared to the fiscal deficit
recorded in the previous year which was at Rs 182290 crores . The reasons for low fiscal deficits
were increase in the revenue receipts ( non tax source ) on account of disinvestments in the PSUs
and auction of 3G and BWA spectrum.
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November 30.2 -6.2
December 25.4 -5.9
January 24.6 -6.2
February 22.2 -5.9
March 18.6
Source: Controller General of Accounts
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7. Foreign trade
Merchandise exports in August ( cumulative for five months, i.e. from April- August ) were seen to
have risen to USD 85 billion as compared to USD 66 billion achieved in the previous year. Imports
were also seen to increase by 33 per cent to USD 141 billion. So were the trade deficits that widened
to USD 56 billion upto August 2010 from USD 40 billion upto August previous year.
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8. Capital inflows
FDI is yet to pick up this year, during the period from April to August of 2010-11 the FDI accumulated
was USD 11.5 billion this was lower from the FDI of USD 13.5 billion received during the
corresponding period of 2009-10.
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9 Foreign exchange reserves
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